Illinois state legislators are running counter to a national trend by proposing creation of a state workers’ compensation insurance fund that would compete with the private system.

The development is generating deep angst amongst Illinois insurers and industry trade groups.

The bill, H.B. 2919, cleared the Illinois State House’s Committee on State Government Administration late Wednesday.

According to Kevin Martin, executive director of the Illinois Insurance Association, the legislation was prompted by worker- and plaintiff- lawyer concerns that reforms to the system enacted in 2011 aimed at reducing the cost of workers’ comp aren’t working fast enough.

He said the bill has strong Democratic support in the House, and noted that Democrats control both the state House and Senate.

The legislature is in session until May 31, Martin said.

Rep. Laura Fine, D, who is sponsoring the legislation, didn’t respond to requests for comment.

The decision is counter to the current trend by the states to allow the private market to drive workers’ compensation systems.

For example, New York is moving to increase premiums charged by its state fund to the level charged by private insurers.

The Texas legislature is considering legislation that would end its last ties with Texas Mutual Insurance Co. TMIC, like the New York state fund, is the state’s largest workers’ compensation insurer.

And, the Oklahoma legislature is considering legislation that would privatize its nonprofit workers’ compensation insurance fund and turn it into a private domestic mutual insurance company.

According to data from the National Council on Compensation Insurance, Inc. cited by Martin, workers’ comp premiums in Illinois have dropped 9.2 percent since the reforms went into effect in September 2001.

That isn’t fast enough for supporters of creating a state-insurance fund, which includes most Democrats in the state legislature, he said.

Martin and Deirdre Manna, vice president of industry, regulatory and political affairs for the Property Casualty Insurers Association of America, say creating a state fund is not a good move.

“Illinois public policy must encourage private enterprise and free markets,” Manna says. “The best way to address escalating costs is to attack the cost drivers.”

She adds there “is no credible evidence that creating a state fund will lower the cost of coverage, and there are other ways to lower costs that do work.”

She notes that a state’s relative workers’ compensation costs are completely unrelated to the nature of the insurance mechanism, and proponents’ attempts to sell legislators and employers on the merits of a state fund based on these assertions are wrong.

“Moreover, self-insured employers have the same cost drivers in Illinois as private insurers,” Manna says.

Martin says one concern is that the state is already deeply in debt and doesn’t have the wherewithal to properly capitalize and staff a fund that would compete with the private market.

For example, he says that the proposed fund would be administered by the state insurance department. But he notes a decision by the state to encourage long-term state employees to retire in 2008 resulted in the loss of many experienced people at the department.

“It is going to be difficult for the state insurance department to ramp up to administer a new department given that a number of its most experienced people have decided to retire,” Martin says